5 things about the Bank of Canada’s overnight rate

Canada’s central bank carries out monetary policy by influencing short-term interest rates. It does this by raising and lowering the target for the overnight rate, which is the interest rate at which major financial institutions borrow and lend one-day (or “overnight”) funds among themselves. Not surprisingly, the overnight rate has a strong impact on the rates Canadians get from their lending institutions when they save or borrow money.

To help the average Canadian get a better grasp on the overnight lending rate, CREB®Now presents some of the key numbers.

Eight
The Bank of Canada announces its decision on the setting of its key policy interest rate eight times a year. The key policy rate decision is always published on a Wednesday at 10 a.m. ET. The next scheduled date is March 9.

52
Prior to January 2015, the bank’s overnight rate had remained unchanged for 52 consecutive months. In the 12 months following that cut, the bank has lowered its overnight rate twice, first to 0.75 per cent in January and then to
0.50 per cent in July.

21.03 per cent
Dating back to January 1935, the highest rate ever reached was 21.03 per cent in August 1981. The average five-year mortgage rate at the time was 21.46 per cent. Five-year fixed mortgage rates in Canada never fell below 10 per cent for a full 18 years – from 1973 to 1991.

0.5 per cent
The current Bank of Canada overnight rate of 0.5 per cent is the lowest rate ever recorded in its 81-year history. The last time the overnight rate fell to such levels was April 2009 when the bank cut the rate from 1.25 to 0.5 per cent in the span of just three months. Prior to 2009, the last time the rate had been below two per cent was September 1960.

$1,709.46
With records dating back to 1935, the Bank’s rate dates back a time when Canada’s population numbered just 10.8 million. According to Statistics Canada, a shopping list of bacon, steak, flour, sugar, coffee, onions, potatoes, milk, eggs and butter would have cost the average Canadian just $3.15 in 1935. For those lucky enough to find themselves in possession of a newly issued $100 bill, it would be like the average Canadian today finding $1,709.46 in their pocket.